Economic History Review, 63, 1 (2010), pp.

34–55

Against the mainstream: Nazi

privatization in 1930s Germany1
By GERMÀ BEL

Nationalization was particularly important in the early 1930s in Germany. The state
took over a large industrial concern, large commercial banks, and other minor firms.
In the mid-1930s, the Nazi regime transferred public ownership to the private sector.
In doing so, they went against the mainstream trends in western capitalistic countries,
none of which systematically reprivatized firms during the 1930s. Privatization was
used as a political tool to enhance support for the government and for the Nazi Party.
In addition, growing financial restrictions because of the cost of the rearmament
programme provided additional motivations for privatization.

P rivatization of large parts of the public sector was one of the defining policies
of the last quarter of the twentieth century. Most scholars have understood
privatization as the transfer of government-owned firms and assets to the private
sector,2 as well as the delegation to the private sector of the delivery of services
previously delivered by the public sector.3 Other scholars have adopted a much
broader meaning of privatization, including (besides transfer of public assets and
delegation of public services) deregulation, as well as the private funding of
services previously delivered without charging the users.4 In any case, modern
privatization has been usually accompanied by the removal of state direction and
a reliance on the free market. Thus, privatization and market liberalization have
usually gone together.
Privatizations in Chile and the UK, which began to be implemented in the
1970s and 1980s, are usually considered the first privatization policies in modern
history.5 A few researchers have found earlier instances. Some economic analyses
of privatization identify partial sales of state-owned firms implemented in Ade-
nauer’s Germany in the late 1950s and early 1960s as the first large-scale priva-

1
Most of this work was done while the author was a visiting scholar at the Kennedy School of Government at
Harvard University. This research has received financial help from the Fundación Rafael del Pino, and from the
Spanish Ministry of Science and Technology (Project SEJ2006-04985). A preliminary version of the paper was
presented at the BMW Center for German and European Studies in Georgetown University, and at Universidad
de Puerto Rico (Campus Ríos Piedras). The paper has also been presented at the 2007 Conference of the
Economic History Society, and the 2007 Spanish Meeting of Public Economics. I am thankful to Benedikt
Kronenberg for his help in translating articles published in Der DeutscheWolkswirt from the German. Comments
and suggestions from Daniel Albalate, Judith Clifton, Xavier Coller, Francisco Comín, Jost Dülffer, Daniel
Fuentes, Luis Quiroga, and anonymous referees have been very useful. I am fully responsible for remaining
errors.
2
Kay and Thompson, ‘Privatisation’, p. 18; Bös, ‘Privatization’, p. 352; Vickers and Yarrow, Privatization, p. 7;
Boardman and Vining, ‘Ownership’, p. 26.
3
Domberger, Meadowcroft, and Thompson, ‘Competitive tendering’, p. 70; Sappington and Stiglitz, ‘Privati-
zation’, p. 567; Donahue, Privatization decision, p. 3; Starr, ‘Meaning of privatization’, p. 22.
4
Pirie, Privatization.
5
Yergin and Stanislaw, Commanding heights, p. 115.
© Economic History Society 2009. Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main
Street, Malden, MA 02148, USA.
 NAZI PRIVATIZATION 35
tization programme,6 and others argue that, although confined to just one sector,
the denationalization of steel in the UK in the early 1950s should be considered
the first privatization.7
None of the contemporary economic analyses of privatization takes into account
an important, earlier case: the privatization policy implemented by the National
Socialist (Nazi) Party in Germany. Nonetheless, there were a number of studies on
German privatization in the mid- and late 1930s and in the early 1940s, when
many academic analyses of Nazi economic policy discussed privatization policies
in Germany.8 International interest was reflected in a change in the English
language: in 1936 the German term ‘reprivatisierung’, and the associated concept,
were brought into English in the term ‘reprivatization’, and soon the term ‘priva-
tization’ began to be used in the literature.9 Surprisingly, modern literature on
privatization, and recent literature on the twentieth-century German economy10
and the history of Germany’s publicly owned enterprises, all ignore this early
privatization experience.11 Some authors occasionally mention the privatization of
banks, but offer no further comment or analysis.12 Other works mention the sale of
state ownership in Nazi Germany, but only to support the idea that the Nazi
government opposed widespread state ownership of firms, and no analysis of these
privatizations is undertaken.13
It is a fact that the Nazi government sold off public ownership in several
state-owned firms in the mid-1930s. These firms belonged to a wide range of
sectors; for example, steel, mining, banking, shipyard, ship-lines, and railways. It
must be pointed out that, whereas modern privatization has run parallel to liber-
alization policies, in Nazi Germany privatization was applied within a framework
of increasing state control of the whole economy through regulation and political
interference.
Most of the enterprises transferred to the private sector at the Federal level had
come into public hands in response to the economic consequences of the Great
Depression. In this way, in 1932 the state took over the Gelsenkirchener Bergwerks
(Gelsenkirchen Mining Company), the controlling group of the second-largest
industrial concern in Germany, Vereignite Stahlwerke AG (United Steelworks),14
because of the financial distress caused by the Great Depression.15 In the same

6
Megginson, Financial economics, p. 15.
7
Burk, First privatisation; Megginson and Netter, ‘History and methods of privatization’, p. 31.
8
Poole, German financial policies; Guillebaud, Economic recovery; Stolper, German economy; Sweezy, Structure;
Merlin, ‘Trends’; Neumann, Behemoth; Nathan, Nazi economic system; Schweitzer, ‘Big business’; Lurie, Private
investment. Other less academic works from this period also comment on privatization in Nazi Germany (for
example, Reimann, Vampire economy; Heiden, Fuehrer).
9
Bel, ‘ “Coining” of privatization’, pp. 190–1.
10
For example, Braun, German economy.
11
For example, Wengenroth, ‘Rise and fall’.
12
Barkai, Nazi economics, p. 216; James, ‘Deutsche Bank and the dictatorship’, p. 291.
13
Hardach, Political economy of Germany, p. 66; Buchheim and Scherner, ‘Role of private property’, p. 406.
14
Vereinigte Stahlwerke (AG)—or United Steelworks in English—was an industrial conglomerate that pro-
duced coal, steel, and iron from the mid-1920s until the end of the Second World War. This conglomerate
included several companies such as Thyssen AG, Phoenix AG für Bergbau und Hüttenbetrieb, Rheinische
Stahlweke AG, Rhein-Elbe-Union GmbH, Deutsch-Luxemburgische Bergwerks- und Hütten-AG, Bochumer
Verein fur Bergbau und Guss-stahlfabrikation, and Gelsenkirchener Bergwerks-AG. This last company, Gelsen-
kirchener Bergwerks-AG, was the strongest firm within Vereinigte Stahlwerke (R. Kühlmann, ‘The German Steel
Trust I’, The Economist, 25 Aug. 1934, p. 346).
15
Neumann, Behemoth, 1933–1944, p. 297; Wengenroth, ‘Rise and fall’, p. 115.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
36 GERMÀ BEL

way, the state took over three out of the five largest commercial banks in Germany,
because of the great banking crisis of 1931: the Darmstädter und Nationalbank
(Danat Bank) collapsed in July 1931, and was soon followed by the Dresdner
Bank.The Danat Bank was merged with the Dresdner Bank in the course of a state
rescue operation.16 The Deutsche Bank, even if not as badly affected by the crisis,
also became dependent on government money, and a large fraction of its shares
was deposited with the Deutsche Golddiskontbank (a subsidiary of the Deutsche
Reichsbank, the central bank).17 Yet another example of nationalization is found in
the shipping-line sector: in 1932 Norddeutscher Lloyd (part of the Vereignite
Industrie Unternehmungen AG of Berlin (VIAG) public holding)18 took over the
majority of the shares of Hamburg-SüdAmerika and of Hansa Dampf, as a
consequence of state rescue operations encouraged by the effects of the Great
Depression.19 All these firms were reprivatized later, between 1935 and 1937.
Nationalization promoted state ownership in several western capitalist countries
in the 1930s. Nationalization was particularly important in those countries most
affected by the Great Depression,20 such as Germany; Italy, where the Istituto per
la Ricostruzione Industriale (IRI) was created in 1933;21 and the Netherlands,
where the number of state-owned firms increased rapidly in several declining
industries.22 Some other countries experienced nationalization in the 1930s; this
did not arise because of the Great Depression, but because of policies related
mainly to the performance of different transportation services in several countries.
In the UK the state took over the London Passenger Transport Board in 1933,23
and took over air transport with the establishment of the British Overseas Airways
Corporation in 1939.24 In France, air transport was partially placed under state
control in 1933, when Air France was created,25 and the state took over the
railways in 1937.26 In Sweden, railroads were nationalized in 1939.27
As shown, nationalization was an important issue in Germany in the early
1930s, and other countries also experienced nationalization in that decade,
whether it was related to the Great Depression or not. But Germany was alone in
developing a policy of privatization in the mid-1930s. Therefore a central question
remains: why did the Nazi regime depart from mainstream policies regarding state

16
Feldman, ‘Financial institutions’, p. 19; James, ‘Banks and business’, p. 44.
17
James, ‘Banks and business’, p. 45.
18
The VIAG was the holding concern by which the German government controlled its ownership in banking
and industrial undertakings. These companies comprised the Reichs-Kredit-Gesellschaft; various electrical
concerns which made the government the second largest producer of electricity in Germany; the Vereignite
Aluminium-Werke, one of the biggest aluminium producers of the world; and a number of other concerns
producing bicycles, gun metal, nitrogen, ships, and so on. According to The Economist (16 June 1934, p. 1308),
in contrast to many Government enterprises elsewhere, the subsidiaries of VIAG were run on strictly commercial
lines, and most of the companies always made a profit.
19
The Economist, 29 April 1933, p. 909; Der Deutsche Volkswirt, 9 July 1937, p. 2021.
20
Aharoni, Evolution and management, pp. 72–4; Clifton, Comín, and Díaz Fuentes, Privatisation, p. 16;
Megginson, Financial economics, pp. 9–10; Toninelli, ‘Rise and fall’, p. 11.
21
Amatori, ‘Beyond state and market’, p. 129.
22
Davids and van Zanden, ‘Reluctant state’, p. 257.
23
Crompton, ‘Railway companies’, p. 139. It is worth noting that prior to the LPTB, two important public
corporations had been established in the 1920s: the British Broadcasting Corporation (1926) and the Central
Electricity Board (1927) (Millward, ‘State enterprise’, p. 158).
24
Millward, ‘State enterprise’, p. 165; Lyth, ‘Changing role’, pp. 76–7.
25
Toninelli, ‘Rise and fall’, p. 17.
26
Harcavi, ‘Nationalization’, p. 224.
27
Millward, Private and public, p. 146.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 37
ownership of firms? Why did Germany’s government transfer firms to the private
sector while the other western countries did not?
Answering these questions requires an analysis of the objectives of Nazi priva-
tization. While some of the analyses carried out in the 1930s and 1940s are
valuable, their authors lacked the theories, concepts, and tools that are available to
us today. Recent economic literature has shown the multiplicity of objectives
usually targeted by privatization policies.28 In addition, modern theoretical devel-
opments have provided valuable insights into the motives of politicians in choosing
between public ownership and privatization29 and the consequences of each option
on political rent seeking, through either excess employment or corruption and
financial support.30 The theoretical literature has provided interesting results con-
cerning the use of privatization to obtain political support.31 In addition, interna-
tional evidence shows that financial motivations have been important in recent
privatization, although the relevance of sales receipts in motivating privatization
has varied over time and between countries.
By providing an analysis of privatization in Nazi Germany, this article seeks to
fill a gap in the economic literature. The article extensively documents the course
of privatization in the period from the Nazi takeover of government until 1937.32
These limits are sensible because all of the relevant reprivatization operations had
been concluded before the end of 1937. Some of the privatization operations
explained in this paper have not been previously noted in the literature (the sale of
state-owned shares in Vereinigte Oberschleschische Hüttenwerke AG and in Hansa
Dampf, both in 1937).33 Analysing Nazi privatization using modern tools and
concepts allows us to conclude that the objectives pursued by the Nazi government
were multiple, with their aim of increasing political support being especially
noteworthy. Besides this, an additional motivation can be seen in obtaining
increased revenue for the German Treasury within a context of growing financial
restrictions since 1934/5, mainly because of the armament programme.
The rest of the article is organized as follows. First, the Nazi privatization policy
is documented, and its quantitative relevance is assessed. This is followed by
discussion of analyses of Nazi privatization found in economic literature of the late
1930s and 1940s. Then the objectives of the privatization policy in Nazi Germany
are analysed. Finally, some conclusions are offered.
I
This section provides a summary of all privatization operations in the mid-1930s
in Germany that it has been possible to document. Discussion of privatization

28
Vickers and Yarrow, Privatization; Vickers and Yarrow, ‘Economic perspectives’.
29
Shleifer and Vishny, ‘Politicians and firms’.
30
Hart, Shleifer, and Vishny , ‘Proper scope’.
31
Perotti, ‘Credible privatization’; Biais and Perotti, ‘Machiavellian privatization’.
32
Studying this period is also very useful because this allows us to avoid confusion between privatization and
the aryanization process. As explained by James (Deutsche Bank and the Nazi economic war, pp. 38–51), after
1936–7 there was an intensification of the aryanization process, which became a ‘state-driven aryanization’. Many
of the largest Jewish-owned businesses had survived until 1938.The anti-Jewish apogee was reached in Nov. 1938,
in the pogrom of the so-called Reichskristallnacht. In addition, analysing Nazi privatization until 1937 allows us
to avoid confusion with the business processes put forward after the annexation of successive territories,
beginning with Austria in 1938.
33
Der Deutsche Volkswirt, 9 July 1937, pp. 2020–1.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
38 GERMÀ BEL

became increasingly prominent soon after the Nazi government took office early in
1933, and privatizations soon followed. In an article published in Der Deutsche
Volkswirt in February 1934, Heinz Marschner proposed ‘The reprivatization of
urban transportation, which after the period of inflation came under public
control, especially in the hands of local governments’.34 This proposal was related
to the Nazi government’s support for returning the ownership of urban transpor-
tation back to the private sector.35 Several months later, in June 1934, in an article
discussing banking policy in Germany (also published in Der Deutsche Volkswirt),
Hans Baumgarten analysed the conditions required for the reprivatization in the
German banking sector.36
Two years later, in November 1936, an article by Max Kruk in Der Deutsche
Volkswirt provided brief information about several privatization operations con-
ducted in 1935 and 1936.37 Only two months later, in January 1937, a new article
in Der Deutsche Volskwirt by Baumgarten commented on several privatization
operations already implemented in the banking sector, and discussed the likeli-
hood of additional privatizations. He noted that ‘generally speaking there is a
consensus between the respective departments that also in the case of Dresdner
Bank the ultimate objective should be its eventual reprivatization’.38 Indeed,
between 1934 and 1937, several privatization operations had been implemented in
Germany.39 The privatization operations can be categorized into five different
sectors: railways; steel and mining; banking; ship building; and shipping lines,
which will now be discussed in turn.
In the 1930s the Deutsche Reichsbahn (German Railways) was the largest single
public enterprise in the world, bringing together most of the railways services
operating within Germany.40 According to the German budget for the fiscal year
1934/5, the last one published,41 railway preference shares were sold by the state.
The motivation for this sale was commented on in The Economist: ‘As revenue
remains about the same figure as last year, increased expenditure is being met by
selling Rm. [Reichsmarks] 220 million of state railway preference shares, as against
Rm. 100 millions’ worth last year’.42 The state remained as the most important
shareholder in Deutsche Reichsbahn, and retained full control of the company. It

34
H. Marschner, ‘Zur Neugestaltung des deutschen Nahverkehrs’, Der Deutsche Volkswirt (16 Feb. 1934,
pp. 857–60), p. 857.
35
Sweezy, ‘German corporate profits’, p. 394, and eadem, Structure, p. 33, suggests that privatization of local
public utilities was also important from 1935 onwards. However, no detailed information is provided on specific
sales of local public utilities.
36
H. Baumgarten, ‘Widerschein der Bankbilanzen’, Der DeutscheVolkswirt (15 June 1934, pp. 1642–5), p. 1645.
37
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319.
38
H. Baumgarten, ‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937,
pp. 826–7) (author’s translation).
39
It is interesting to take into account the profile of these German journalists writing on privatization in Der
Deutsche Volkswirt. Hans Baumgarten (1900–68) was one of the leading writers in Der Deutsche Volkswirt, and his
articles had some impact on contemporary academic literature (for example, Pumphrey, ‘Planning for economic
warfare’). After the war, he was the co-founder and editor of the Deutsche Zeitung undWirtschaftszeitung. Later he
joined the Frankfurter Allgemeine Zeitung, and was a member of its supervisory board between 1965 and 1968.
Max Kruk (1914–92) was a journalist for Der DeutscheVolkswirt. From 1952 he was editor of the economy section
in the Frankfurter Allgemeine Zeitung. Less information exists on Heinz Marschner, who published in 1937 the
economic encyclopaedia Deutschland in der Wirschaft der Welt (Berlin: Dt. Verl. Politik und Wirschaft).
40
Macmahon and Dittmar, ‘Autonomous public enterprise’, pt. 1, p. 484.
41
Pollock, Government of greater Germany, p. 121.
42
The Economist, 31 March 1934, p. 694.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 39
is worth noting that the selling of a minority of shares without relinquishing state
control was a different type of operation from those that are documented below.
We now turn to the steel and mining sector. In 1932, the German government
bought more than 120 million marks of shares of Gelsenkirchener Bergwerks, the
strongest firm within Vereignite Stahlwerke AG (United Steelworks).43 At that
time, United Steelworks was the second-largest joint-stock company in Germany
(the largest was Farben Industrie AG). The state took over the shares at 364 per
cent of their market value.44 Several reasons have been offered to explain this
nationalization: (a) to have effective control over United Steelworks;45 (b) to
socialize costs derived from the effects of the Great Depression;46 and (c) to
prevent foreign capital taking over the firm.47
Soon after the Nazi Party took power, United Steelworks was reorganized so
that the government majority stake of 52 per cent was converted into a stake of less
than 25 per cent, no longer sufficient in German law to give the government any
privileges in company control.48 Fritz Thyssen, who held the leading position in
United Steelworks, had been one of only two leading industrialists to give support
to the Nazi Party before it achieved political dominance.49 In 1936, the govern-
ment sold its block of shares, amounting to about 100 million Rm., to United
Steelworks.50 According to Kruk, this operation was the largest single sale—until
the end of 1936—within the process of ‘indirect consolidation’ (of the public
debt), in which privatization was used as a tool for debt consolidation.51 The state
did not retain ownership in United Steelworks after this privatization operation
was completed.
The company Vereinigte Oberschleschische Hüttenwerke AG concentrated all
metal production in the Upper Silesian coal and steel industry.The Seehandlung (a
Prussian state bank dependent on the Reichsbank) owned 45 per cent of this firm;
these shares had been received in exchange for the offsetting of debt caused by
company restructuring.The remaining shares were owned by Castellengo-Abwerh,
one of the most significant Upper Silesian coal mines. Castellengo’s capital was
owned by Ballestrem. By mid-1937, the state’s 6.75 million Rm. of shares were sold
to Castellengo, and the company was fully private thereafter. No particular moti-
vation can be identified for this sale, and with this privatization ended the financial
state intervention in the Upper Silesian coal and steel industry.52
Moving on to the banking sector, before the crash of 1929, state-owned com-
mercial banks accounted for at least 40 per cent of the total assets of all banks, and
one of the five big commercial banks, the Reichs-Kredit-Gesellschaft, was publicly
owned.53 The state was involved in the reorganization of the sector after the bank

43
The Economist, 28 March 1936, p. 701.
44
Wengenroth, ‘Rise and fall’, p. 115.
45
The Economist, 8 July 1933, p. 73.
46
Neumann, Behemoth, 1933–1944, p. 297.
47
Wengenroth, ‘Rise and fall’, p. 115.
48
Details of this reorganization are provided in R. Kühlmann, ‘The German Steel Trust II’, The Economist (1
Sept. 1934), pp. 391–2.
49
Barkai, Nazi economics, p. 10.
50
M. Kruk, ‘Konsolidierungs-Wege’, Der DeutscheVolkswirt (13 Nov. 1936, pp. 319–20), p. 319; Reichs-Kredit-
Gesellschaft, Germany’s economic situation 1936/37, p. 55.
51
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319.
52
Der Deutsche Volkswirt, 9 July 1937, pp. 2020–1.
53
Stolper, German economy, p. 207.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
40 GERMÀ BEL

crash in 1931 with an investment of about 500 million Rm., and most of the big
banks came under state control, as noted in the introduction.54 Estimates made
before the Banking Inquiry Committee in 1934 by Hjalmar Schacht, president of
the Reichsbank and Minister of Economy, stated that around 70 per cent of all
German corporate banks were controlled by the Reich.55 Through the Reichsbank
or the Golddiskontbank, the government owned significant stakes in the largest
banks:56 38.5 per cent of Deutsche Bank und Disconto-Gesellschaft (Deutsche
Bank henceforth), 71 per cent of the Commerz- und Privatbank (Commerz-Bank
henceforth), and 97 per cent of the capital of the Dresdner Bank.57
After the banking sector became subject to new and strict regulatory and
institutional constraints (see section III for details of the works of the Banking
Committee and of the regulatory process), the government was eager to raise
money from privatization, as pointed out in The Economist and in The Banker.58
Then, state ownership in the large commercial banks was sold in successive
operations. The Commerz-Bank was reprivatized through several shares sales in
1936–7. These shares amounted to 57 million Rm., and the largest single trans-
action was a sale of 22 million Rm. in October 1936.59 Deutsche Bank was
reprivatized in several operations effectively implemented in 1935–7. The largest
was the repurchase in March 1937 of shares still held by the Golddiskontbank.
These shares amounted to 35 million Rm. and Deutsche Bank placed them among
its clients. In total, the reprivatization of Deutsche Bank shares amounted to
50 million Rm.60 Finally, the Dresdner Bank was also reprivatized in several shares
sales in 1936–7. These shares amounted to 141 million Rm., and the largest single
sale was of 120 million Rm. in September 1937.61 At the end of all of these
operations, the state did not retain ownership in these three banks.
A further example of privatization can be found in the ship building sector. In
March 1936, a group of Bremen merchants purchased a block of shares of the
Deutschen Schiff-und Machisnenbau AG Bremen ‘Deschimag’ (German Ship-

54
Ellis, ‘German exchange’, p. 22.
55
Sweezy, Structure, p. 31.
56
The degree of control exercised by the state over the big commercial banks by means of public ownership is
open to discussion. Most likely, state interference through ownership varied according to the relevance of the
publicly owned stake.Whereas interference in the Deutsche Bank was relatively light (Feldman, ‘Deutsche Bank’,
p. 272; James, ‘Banks and business’, pp. 45–9), intervention in the Dresdner Bank was very intense (James,
Deutsche Bank and the Nazi economic war, p. 16; Feldman, ‘Financial institutions’, p. 23). In any case, the reform
of banking regulation that began with the German Bank Act of 1934 allowed the government to exercise tight
control over private banks. Dessauer (‘German Bank Act’) provides an extensive explanation of the German Bank
Act of 1934; O. Nathan, ‘Nazi war finance and banking’, NBER occasional paper 20 (New York, 1944) adds
information on subsequent changes in regulation.
57
H. Baumgarten, ‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937,
pp. 826–7). Other relevant stakes held by the state in banks were 70% of the Allgemeine Deutsche Kreditantstalt,
and 66.6% of the Norddeutsche Kreditbank (Sweezy, Structure, p. 31). Russell (‘Reich’, pp. 204–8) offers a
detailed analysis of ownership relations between the Reich and the commercial banks.
58
The Economist, 1 Aug. 1936, p. 220; The Banker, ‘Germany’, p. 131.
59
M. Kruk, ‘Konsolidierungs-Wege’, Der DeutscheVolkswirt (13 Nov. 1936, pp. 319–20), p. 319; The Economist,
3 April 1937, p. 16; Reichs-Kredit-Gesellschaft, Germany’s economic situation 1936/37, p. 55; League of Nations,
Money and banking 1936/37, p. 77; League of Nations, Money and banking 1937/38, p. 92.
60
H. Baumgarten, ‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937,
pp. 826–7); The Economist, 3 April 1937, p. 16; League of Nations, Money and banking 1937/38, p. 92.
61
H. Baumgarten, ‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937,
pp. 826–7); League of Nations, Money and banking 1937/38, p. 92; Reimann, Vampire economy, p. 181; Barkai,
Nazi economics, p. 216.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 41
building and Engineering Co.). These shares had passed into state ownership
because of a convertible loan. The sale amounted to 3.6 million Rm., and no state
ownership was retained.62 Kruk includes this operation within the ‘indirect con-
solidation’ process.63
We now turn to the last category, that of shipping lines. In 1932, the publicly
owned Norddeutscher Lloyd had taken over the majority of sales of the shipping
companies Hamburg-SüdAmerika and Hansa Dampf. In September 1936, the
publicly owned shares of the Hamburg-SüdAmerika shipping company were sold
to a Hamburg syndicate.64 The sale of shares amounted to 8.2 million Rm.65 As in
the case of the sale of Deschimag, Kruk includes this sale within the debt con-
solidation process.66 In mid-1937, Norddeutscher Lloyd sold its remaining shares
in Hansa Dampf to a consortium made up of the Deutsche Bank and Berliner
Handels-Gesellschaft. The sale of shares amounted to 5 million Rm.67 After these
sales, no state ownership was retained either in Hamburg-SüdAmerika or in Hansa
Dampf.
The extensive list of privatizations documented above makes clear that selling
public ownership was an important policy in Nazi Germany, but what was its
quantitative relevance? In the late 1930s and the early 1940s, academic works that
mentioned instances of privatization in some detail68 used basically one source of
documentation: Germany’s economic situation at the turn of 1936/37, a report pub-
lished in English in 1937 by Reichs-Kredit-Gesellschaft, a German state-owned
bank.69 Page 55 of this report displays a summary of information about four
reprivatizations, affecting the German Shipbuilding and Engineering Co., United
Steelworks, the Hamburg-South American Shipping Company, and the
Commerz-Bank. The information includes the approximate date of the operations
and, in two cases (United Steelworks and the Hamburg-South American Shipping
Company), the amount of Reichsmarks involved.
As mentioned, the German budget for the fiscal year 1934/5 was the last one for
which detailed information was published, and no detailed information on finan-
cial operations was published thereafter.70 With the end of detailed public budgets
in 1935, Der Deutsche Volkswirt became the primary source of information about

62
M. Kruk, ‘Konsolidierungs-Wege’, Der DeutscheVolkswirt (13 Nov. 1936, pp. 319–20), p. 319; Reichs-Kredit-
Gesellschaft, Germany’s economic situation 1936/37, p. 55. No detailed information on the percentage of state
ownership is available. Peter Müller (Seebeckwerft 1933–1945; available at http://werften.fischtown.de/archiv/
ssw5.html, accessed 16 July 2008) provides detailed information on the characteristics (private partners) of the
privatization operation, and the amount of Rm. that each private investor committed to the operation (adding up
3.6 million Rm.).
63
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319.
64
The ship-owners of Hamburg joined the Nazi Party as a group. The head of the oldest shipping concern in
Hamburg explained that the decision by the ship-owners to join the Nazi Party was not taken because of
ideological conviction, but in order to avoid interference from the Nazis in their business (Lochner, Tycoons and
tyrant, pp. 220–1).
65
M. Kruk, ‘Konsolidierungs-Wege’, Der DeutscheVolkswirt (13 Nov. 1936, pp. 319–20), p. 319; Reichs-Kredit-
Gesellschaft, Germany’s economic situation 1936/37, p. 55.
66
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319.
67
Der Deutsche Volkswirt, 9 July 1937, p. 2021.
68
Poole, German financial policies; Sweezy, Structure; Lurie, Private investment.
69
Along with this Reichs-Kredit-Gesellschaft report, Sweezy (Structure, p. 32) also used the 1938 report of the
League of Nations, Money and banking 1937/38, which provided additional information on reprivatization of
banks. As in the case of data published in the Reichs-Kredit-Gesellschaft report, the information provided by the
League of Nations was based on news and analysis published in Der Deutsche Volkswirt.
70
Pollock, Government of greater Germany, p. 121.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
42 GERMÀ BEL

privatization in Germany. The editorial page for that paper was considered a
mouthpiece for Hjalmar Schacht, appointed head of the Reichsbank by Adolf
Hitler in 1933 and then, in 1934, Minister of Economy;71 Der Deutsche Volkswirt
provided detailed information on the Ministry’s position on reprivatization and its
implementation.72
Since Der Deutsche Volkswirt was the primary source of information on privati-
zation in Germany, it is worth noting that two articles published by Kruk in late
1936 provided the information later mentioned in the 1937 report by Reichs-
Kredit-Gesellschaft.73 In fact, the information provided by Kruk in his article
‘Konsolidierungs-Wege’ provides fuller coverage of the financial characteristics of
the operations. Thus, here it is possible to find information on the amount of
Reichsmarks involved in all four privatization operations later mentioned in Ger-
many’s economic situation at the turn of 1936/37 (whereas most contemporary
scholars and analysts who relied only on Germany’s economic situation knew only
the amounts for two of the operations). In addition to this, several articles and
news reports published in 1937 in Der Deutsche Volkswirt provide information on
cases of privatization implemented during that year.74 On the basis of all this
material, it has been possible to compile quantitative information on many of the
privatizations implemented at the Reich level after the 1934/5 budget up to the end
of 1937. Table 1 presents a list of all privatization operations for which it has been
possible to gather financial and corporate information.
Table 2 presents an estimate of the proceeds from privatization, and its relative
dimension. This estimate inevitably presents minimum amounts, since (1) no
detailed information is available from the budget after 1934/5, and (2) some
operations may have been implemented but would not have appeared in the
sources of information used. Estimates presented in table 2 show that between the
fiscal years 1934/5 and 1937/8 privatization was an important source of revenue
for Germany’s Treasury. In the period as a whole, privatization proceeds were at
least 1.37 per cent of total fiscal revenues. The fiscal relevance of privatization
proceeds to Germany in 1934–7 can hardly be denied, particularly since the
estimate provided here is a minimum.

II
We can now turn our attention to the discussion of Nazi privatization in the late
1930s and the 1940s. Privatization policy in Germany was discussed in several
academic works.75 Most of them analysed these issues within the framework of the
controversy between two positions76 that held either that private property and
property rights were left untouched by the Nazis or that the Nazis destroyed such
rights.

71
The Economist, 18 April 1936, p. 127.
72
See, for instance, the editorial page in Der Deutsche Volkswirt, 9 April 1936, p. 1315.
73
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20); idem, ‘Die
Kreditmärkte im Konsolidierungsprozeß’, Der Deutsche Volkswirt (24 Dec. 1936), pp. 671–3.
74
For instance, Der DeutscheVolkswirt, 9 July 1937, pp. 2020–1, and H. Baumgarten, ‘Großbanken auf dem Weg
der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937, pp. 826–7).
75
Poole, German financial policies; Guillebaud, Economic recovery; Stolper, German economy; Sweezy, Structure;
Merlin, ‘Trends’; Neumann, Behemoth; Nathan, Nazi economic system; Schweitzer, ‘Big business’; Lurie, Private
investment.
76
Schweitzer, ‘Big business’, pp. 99–100.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 Table 1. Sales of state ownership in Germany, 1934–7
Year(s) Amount Position of the state

© Economic History Society 2009

Firm Sector of sale(s) (million Rm.) Motivation* after the sale(s)

Deutsche Reichbahn Railways 1934 220 Financial State retained majority and
full control
Vereignite Stahlwerke Steel 1936 100 Financial and political State did not remain as
shareholder
Vereinigte Steel 1937 6.75 No detailed information State did not remain as
Oberschleschische available shareholder
Hüttenwerke AG
Deutsche Bank und Banking 1935–7 50 Financial State did not remain as
Disconto-Gesellschaft shareholder
Commerz- und Privatbank Banking 1936–7 57 Financial State did not remain as
shareholder
Dresdner Bank Banking 1936–7 141 Financial State did not remain as
shareholder
Deutschen Schiff-und Ship-building 1936 3.6 Financial State did not remain as
Machisnenbau AG shareholder
NAZI PRIVATIZATION

Bremen
Hamburg-SüdAmerika Shipping lines 1936 8.2 Financial and political State did not remain as
shareholder
Hansa Dampf Shipping lines 1937 5 No detailed information State did not remain as
available shareholder

Notes: * Motivations stated in the literature (by either scholars or analysts) for these operations.
Sources: Author’s estimation, based on information published in Der DeutscheVolkswirt; Reichs-Kredit-Gesellschaft, Germany’s economic situation 1936/37, p. 55; League of Nations, Money and
banking 1937/38, p. 92; H. Baumgarten, ‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937, pp. 826–7); M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche
Volkswirt (13 Nov. 1936, pp. 319–20), p. 319; idem, ‘Die Kreditmärkte im Konsolidierungsprozeß’, Der Deutsche Volkswirt (24 Dec. 1936, pp. 671–3).
43

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44 GERMÀ BEL

Table 2. Privatization proceeds in Nazi Germany, April 1934–March 1938

Proceeds from privatization Fiscal revenues (1)/(2)
Period (million Rm.) (1) (million Rm.) (2) in %

1934/5–1935/6 238.6 17,877 1.33%

1936/7–1937/8 352.9 25,456 1.39%
April 1934–March 1938 591.5 43,333 1.37%

Notes: Fiscal years begin in April and end in March. Data are aggregated in biannual periods because original information does
not allow distinguishing the precise fiscal year in which some operations were effective.
Sources: Privatization revenues: author’s estimation, based on information published in Der Deutsche Volkswirt; Reichs-Kredit-
Gesellschaft, Germany’s economic situation 1936/37, p. 55; League of Nations, Money and banking 1937/38, p. 92; H. Baumgarten,
‘Großbanken auf dem Weg der Reprivatisierung’, Der Deutsche Volkswirt (22 Jan. 1937, pp. 826–7); M. Kruk, ‘Konsolidierungs-
Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319; idem, ‘Die Kreditmärkte im Konsolidierungsprozeß’, Der
Deutsche Volkswirt (24 Dec. 1936, pp. 671–3).
Fiscal revenues: Reichs-Kredit-Gesellschaft, Germany’s economic situation 1938/39, p. 98.Yearly figures are as follows (millions of
Reichsmarks): 1934/5: Rm. 8,223; 1935/6: Rm. 9,654; 1936/7: Rm. 11,492; 1937/8: Rm. 13,964.

On one hand, the intense growth of governmental regulation of markets, which

heavily restricted economic freedom, suggests that the rights inherent to private
property were destroyed. As a result, privatization would be of no practical con-
sequence, since the state assumed full control of the economic system.77 On the
other hand, the activities of private business organizations and the fact that big
businesses had some power seem to be grounds for inferring that the Nazis
promoted private property. Privatization, according to this analysis, was intended
to promote the interests of the business sectors supportive of the Nazi regime, as
well as the interests of the top echelons in the Nazi Party.78
Guillebaud stresses that the Nazi regime wanted to leave management and risk
in business in the sphere of private enterprise, subject to the general direction of
the government.Thus, ‘the State in fact divested itself of a great deal of its previous
direct participation in industry . . . But at the same time state control, regulation
and interference in the conduct of economic affairs was enormously extended’.79
Guillebaud felt that National Socialism was opposed to state management, and
saw it as a ‘cardinal tenet of the Party that the economic order should be based on
private initiative and enterprise (in the sense of private ownership of the means of
production and the individual assumption of risks) though subject to guidance and
control by state’.80 This can be seen as the basic rationale for privatization,
according to Guillebaud’s analysis.
Perhaps the most suggestive work on privatization in Nazi Germany is Sweezy’s
The structure of the Nazi economy. On one hand, Sweezy endorses the idea that Nazi
privatization was a policy applied in return for business assistance. In Sweezy’s
view, the Nazis paid back industrialists who supported Hitler’s accession to power
and his economic policies ‘by restoring to private capitalism a number of monopo-
lies held or controlled by the state’.81 This policy implied a large-scale programme
by which ‘the government transferred ownership to private hands’.82

77
Stolper, German economy, p. 207.
78
Sweezy, Structure, pp. 27–8; Merlin, ‘Trends’, p. 207; Neumann, Behemoth, 1933–1944, p. 298.
79
Guillebaud, Economic recovery, p. 55.
80
Ibid., p. 219.
81
Sweezy, Structure, p. 27.
82
Ibid., p. 28.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 45
On the other hand, in order to explain Nazi privatization, Sweezy puts forward
an interesting hypothesis consistent with the macroeconomic design of Nazi eco-
nomic policy. She argues that one of the main objectives for the privatization policy
was to stimulate the propensity to save, since a war economy required low levels of
private consumption.83 This, according to Sweezy, ‘was thus secured by “repriva-
tization” . . . The practical significance of the transference of government enter-
prises into private hands was thus that the capitalist class continued to serve as a
vessel for the accumulation of income’.84
Consistent with Sweezy’s approach, Merlin states that Germany’s Nazi Party
was looking not only for business support, but also for increased Nazi control over
the economy. In this way, privatization was seen as a tool in the hands of the Nazi
Party to ‘facilitate the accumulation of private fortunes and industrial empires by
its foremost members and collaborators’. This would have intensified the central-
ization of economic affairs and government with an increasingly narrow group that
Merlin termed ‘the national socialist elite’.85
Other contemporary analyses put much more emphasis on financial budgetary
restrictions as a primary driver of privatization. Thus, while commenting on an
editorial on reprivatization published in Der DeutscheVolkswirt ( 9 April 1936), The
Economist wrote: ‘Also, the Reich wants money; and it has shown a tendency to
shed its interests in other private concerns, having recently sold back its steel trust
shares. In the banks the Reich and the Gold Discount Bank still have an interest
of some 150–200 million Rm. “Re-privatization”, as it is called, has, however, been
under way in the cases of all three banks’.86 Similarly, Kruk wrote that ‘Such a form
of “indirect consolidation” [of the public debt] could be observed in two different
forms. One of them is known under the term “privatization”, which has been
frequently present . . . The process of selling the Reich’s participation in private
companies is recognized as important’.87
In addition to this, The Banker made explicit connections between increasing
financial constraints experienced by the Treasury (especially since the fiscal year
1935/6) and the sale of government shares.88 In December 1936, The Economist
wrote: ‘An official report implies that the Reich may alienate more of its industrial
and other undertakings in order to obtain cash for extraordinary expenditure.
Certain Reich holdings acquired during the 1931 crisis have already been sold, but
there remain valuable industrial participations’.89 Also, other more scholarly works
stressed the relevance of privatization for funding public expenditure. For
example, Poole wrote that ‘more and more of the public debt has passed into
private hands as the regime has found itself in need of funds. The government has
sold its participation in a number of public enterprises’.90

83
In fact, private consumption in terms of national income decreased from 83% in 1932 to 59% in 1938
(Overy, Nazi economic recovery, p. 34).
84
Sweezy, Structure, p. 28. This hypothesis is interesting, but the relative dimension of the privatization
programme does not seem to be large enough to be effective for such an ambitious purpose.
85
Merlin, ‘Trends’, p. 207.
86
The Economist, 1 Aug. 1936, p. 220.
87
M. Kruk, ‘Konsolidierungs-Wege’, Der Deutsche Volkswirt (13 Nov. 1936, pp. 319–20), p. 319 (author’s
translation).
88
The Banker, ‘Germany’, p. 112.
89
The Economist, 5 Dec. 1936, pp. 466–7.
90
Poole, German financial policies, p. 168.
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46 GERMÀ BEL

Early analysis of Nazi privatization explicitly stated that German privatization of

the 1930s was intended to benefit the wealthiest sectors and enhance their eco-
nomic position, in order to gain their political support. This interpretation
reflected the predominant idea (at that time) that leading industrialists strongly
supported the Nazi Party and Hitler’s accession to power. Also, the financial
restrictions imposed on the Treasury by increasing public expenditure, particularly
since 1935/6, were seen by several analysts and scholars as a driver for privatiza-
tion. The next section discusses these issues. Thus far, regardless of specific
interpretations, it is clear that a wide-ranging privatization policy was applied in
Germany in the mid-1930s, and that analysts and researchers of the time recog-
nized its importance. Even international organizations, such as the League of
Nations, took note, and international interest was reflected in a change in the
English language.91 In 1936, the German term ‘reprivatisierung’, and the associated
concept, were brought into English in the term ‘reprivatization’.92

III
Modern economic literature and recent privatization experiences provide concepts
and tools that are useful for a richer analysis of the objectives of Nazi privatization.
Recent literature has shown the multiplicity of objectives at which privatization
policies are aimed.93 Analysis of privatization usually identifies three types of
objectives in recent privatization processes: (1) ideological motivations; (2) politi-
cal motivations; and (3) pragmatic (economic) motivations. Were any (or all) of
these objectives relevant in Nazi privatization?
(1) Did the Nazi government use privatization to change the way in which
society was organized? Privatization was not included either in the Nazi Party
electoral manifestoes or in the successive revisions of the Economic and Social
Programme approved in 1920 by the Nazi Party.94 On the contrary, points 13 and
14 of the 25 points of this Programme included proposals for the nationalization
of trusts and banks.95 Proposals for nationalization were also recurrent in the Nazi
electoral manifestoes. Hence, the privatization of state-owned firms was contrary
to the Nazi economic programme and election proposals.
Nazi policy was heavily dependent on Hitler’s decisions. Hitler did not make
specific comments on nationalization or denationalization in Mein Kampf. Even if
Hitler was an enemy of free market economies,96 he could by no means be
considered sympathetic to economic socialism or the nationalization of private
firms.97 The Nazi regime rejected liberalism, and was strongly opposed to free

91
Thus, the 1937/8 League of Nations report on banking and finance conditions commented that ‘The process
known as “reprivatisation” of the big Berlin banks by the purchase on behalf of private persons of their shares held
by the State of public corporations since the reconstruction following the 1931 crisis was completed by the end
of 1937’ (League of Nations, Money and banking 1937/38, p. 92).
92
Bel, ‘ “Coining” of privatization’, pp. 190–1.
93
Vickers and Yarrow, Privatization; Vickers and Yarrow, ‘Economic perspectives’.
94
According to Stolper (German economy, p. 231), ‘this program has remained the spiritual foundation of the
movement. It is being taught in every school, referred to in all training courses of all the various units of the party.
It constitutes, together with Mein Kampf by Hitler, the directing force of the intellectual concept and trend of the
party’.
95
Ibid., p. 232; Barkai, Nazi economics, p. 23.
96
Overy, War and economy, p. 1.
97
Heiden, Fuehrer, p. 642.
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 NAZI PRIVATIZATION 47
competition and regulation of the economy by market mechanisms.98 Still, as a
social Darwinist, Hitler was reluctant to dispense totally with private property and
competition.99 Hitler’s solution was to combine autonomy and a large role for
private initiative and ownership rights within firms with the total subjection of
property rights outside the firm to state control. As pointed out by Nathan, ‘It was
a totalitarian system of government control within the framework of private
property and private profit. It maintained private enterprise and provided profit
incentives as spurs to efficient management. But the traditional freedom of the
entrepreneur was narrowly circumscribed’.100 In other words, there was private
initiative in the production process, but no private initiative was allowed in the
distribution of the product. Owners could act freely within their firms, but they
were extremely restricted in the market.
Given this combination of private ownership within the firm and extreme state
control outside the firm, the core question here is whether Hitler was opposed to
public property, or ideologically favoured privatization. On this issue, it is inter-
esting to note two interviews in May and June 1931, in which Hitler explained his
aims and plans to Richard Breiting, editor of the Leipziger Neueste Nachrichten, on
the condition that it remained confidential.101 With respect to his position regard-
ing private ownership, Hitler explained that ‘I want everyone to keep what he has
earned subject to the principle that the good of the community takes priority over
that of the individual. But the state should retain control; every owner should feel
himself to be an agent of the State . . . The Third Reich will always retain the right
to control property owners’.102 Another indication of Hitler’s position on state
ownership of the means of production is found in Rauschning’s Voice of destruction,
which reports the following answer by Hitler when questioned on socialization:
‘Why bother with such half-measures when I have far more important matters in
hand, such as the people themselves? . . . Why need we trouble to socialize banks
and factories? We socialize human beings’.103
It seems clear that neither the Nazi Party nor Hitler was ideologically devoted to
private ownership. In fact, Nazis used nationalization when they considered it
necessary.The case of the nationalization of two aircraft companies, the Arado and
Junkers firms, is widely known.104 As Wengenroth explains, ‘uncooperative indus-
trialists such as the aircraft manufacturer Hugo Junkers were removed from their
positions and replaced with Nazi governors. This was not an explicit nationaliza-
tion policy, but simply an attempt to control production and investment policies in
the interest of rearmament’.105 In fact, as stated by Overy, Hugo Junkers ‘refused
to produce warplanes for Göering and found his business nationalized’.106 Indeed,
Buchheim and Scherner note that state-owned plants were seen as necessary when

98
Barkai, Nazi economics, p. 10.
99
Turner, ed., Hitler, p. 71; Hayes, Industry, p. 71.
100
Nathan, Nazi economic system, p. 5.
101
Calic, Unmasked, p. 11.
102
Ibid., pp. 32–3.
103
Rauschning, Voice of destruction, pp. 192–3. Hermann Rauschning was National Socialist President of the
Danzig Senate in 1933–4. Later, he was expelled from the Nazi Party.
104
Homze, Arming, pp. 192–3.
105
Wengenroth, ‘Rise and fall’, p. 115.
106
Overy, Nazi economic recovery, p. 40.
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48 GERMÀ BEL

private industry was not prepared to realize a war investment on its own.107 Less
well-known than Junkers’s case is that of the nationalization of the private Lübeck-
Büchener and Brunswick Landes railways in 1937 for incorporation into the Reich
Railways Company. Nationalization of these railways was carried out because of
the financial distress faced by both companies, and was well received by the Stock
Exchange.108 However, these types of nationalization operations were scarce, and
followed armament-related problems and financial distress experienced by declin-
ing sectors, such as railways. Hence, they fit well with our analysis of the relevance
of the reprivatization process and its drivers.
To sum up, in their theoretical work on the relationship between politicians and
firms, Shleifer and Vishny stress that anti-market governments are compatible with
privatization, as long as they can retain control over firms through strong regula-
tion.109 Nazi privatization in the mid-1930s is consistent with Shleifer and Vishny’s
proposition 15, which states that when politicians can have control of a firm—even
without direct ownership—they will prefer private ownership to public owner-
ship.110 The Nazi government could establish stronger regulation over the markets,
and could use all tools at hand in a dictatorial regime to enforce regulation strictly.
According to Thyssen, ‘government regulation of commerce and industry in
Germany had led to total state control’.111 As suggested by Temin, property
ownership was instrumental for Nazis.112 Hence, it is not likely that ideological
motivations played a relevant role as a rationale for Nazi privatization. After all, in
Hitler’s view, the dilemma between public and private property was not of primary
order, since he could rely on the control of property owners.113
(2) Did the Nazi government use privatization as a tool to obtain political
support? The idea that industrialists massively supported the Nazi accession to
power was widely accepted in the early literature on Hitler’s rise to power.
Nonetheless, this view was by no means unanimous, and there was early opposi-
tion to it.114 Following Turner’s more recent work,115 it is generally accepted that
Hitler only achieved widespread support among industrialists when his accession
to power was seen as unavoidable, from about mid-1932 onwards.116
The fact is that the Nazis came into power with limited parliamentary support
and faced great difficulty in establishing stable alliances.117 In addition, fighting
unemployment was their top priority, and that required big business coopera-

107
Buchheim and Scherner, ‘Role of private property’, p. 406.
108
The Economist, 20 Nov. 1937, p. 369.
109
Shleifer and Vishny, ‘Politicians and firms’, p. 1015.
110
Ibid., p. 1021.
111
Thyssen, I paid Hitler, p. 147. Many scholars have endorsed the view that the Nazi regime strongly increased
regulation: Barkai, Nazi economics, p. 3; Guillebaud, Economic recovery, p. 219; James, ‘Banks and business’, p. 43;
Nathan, Nazi economic system, p. 51; Overy, War and economy, p. 16.
112
Temin, ‘Soviet and Nazi’.
113
This is consistent with the idea, expressed by Buchheim and Scherner (‘Role of private property’, p. 411),
that ‘the relationship between state and industry in the Nazi period can therefore be best interpreted as a
temporary partnership where the state was the principal and the industry the agent’.
114
Drucker, End of economic man, pp. 130–1; Lochner, Tycoons and tyrant.
115
Particularly Turner, German big business.
116
Barkai, Nazi economics, p. 10.
117
The Nazi Parliamentary Group gathered 196 out of 584 seats (33.6%) when Hitler was appointed
Chancellor in Jan. 1933. Subsequent elections in March 1933 gave the Nazi Party 288 out of 647 seats (44.5%).
Data on Nazi parliamentary representation can be found in Lochner, Tycoons and tyrant, p. 23.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 49
tion.118 As stressed by Barkai, Hitler did not want to frighten the economy.119
Consequently, the new regime tried hard to break down business mistrust.120
Once the Nazis came into power, it did not take long for the government to
produce official statements against nationalization. On 12 February 1933, Mr
Bang, an important advisor within the team of Alfred Hugenberg, the State
Secretary of Public Economics, publicly stated that ‘The policy of nationalization
pursued in the last years will be stopped. The state owned enterprises will be
transformed again into private firms’.121 It is worth noting that Hugenberg was not
a member of the Nazi Party. In fact, most of the members of Hitler’s first cabinets
did not belong to the Nazi Party.These cabinet members belonged to conventional
right-wing parties (before they were suppressed in July 1933) and had strong ties
with German industrialists.
No doubt, the paradigmatic example of the non-Nazi and business connected
policymaker was Hjalmar Schacht, head of the Reichsbank and Minister of
Economy. Schacht was considered the ‘economic fuehrer’ in the first Hitler gov-
ernments.122 Commenting on his own position in the government, Schacht
recalled that ‘Inside the party there was a strong movement to bring more and
more industries into the hands of the state . . . Private insurance companies were
particularly conscious of this threat and they approached me to secure my inter-
vention with Hitler in the matter . . . Here, too, my intervention was successful’.123
It is clear that Schacht’s power was based on a warranty given by Hitler to the big
business community of friendly economic policies and governmental attitudes
towards big business interests.
It is likely that privatization—as a policy favourable to private property—was
used as a tool for fostering the alliance between the Nazi government and big
industrialists. The government sought to win support for its policies from big
business, even if most industrialists had been reluctant to support the Nazi Party
before it came to power.
The policies implemented in the financial sector provide evidence of the poten-
tial of privatization as a tool to enhance political support. Schacht (president of the
Reichsbank at that time) created a Banking Inquiry Committee in 1933. The
Committee, headed by Schacht himself, convened for the first time in September
1933 and developed its work over the course of a whole year.124 The Committee’s
objectives were to conduct research into the banking system and to analyse the
reorganization of the sector. Several radical officers of the Nazi Party appearing
before the Banking Committee proposed the nationalization of the entire banking
system in accordance with the Nazi economic and social programme and the Nazi

118
Overy, Nazi economic recovery, p. 40.
119
Barkai, Nazi economics, p. 114.
120
Hayes, Industry, p. 33.
121
Le Temps, 12 Feb. 1933, p. 2.
122
Schacht’s power was at its peak at the time of his public speeches in 1935 defending the principles of
capitalism: in Königsberg in Aug. (The Economist, 24 Aug. 1935, p. 366) and at the Academy for German Law in
Dec. (The Economist, 7 Dec. 1935, p. 1124). The period when Schacht’s strength was at its peak coincided with
the period in which most privatization operations were implemented. Schacht’s power decreased throughout
1937, and finally came to an end when Hermann Göring took control of economic policy. Schweitzer, Big business
in the Third Reich, p. 610, contains a detailed chronogram of the rise and decline of Schacht’s power. When his
resignation was officially announced in Nov. 1937, the reprivatization process was already over.
123
Schacht, Account, p. 78.
124
Barkai, Nazi economics, p. 208.
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50 GERMÀ BEL

electoral manifesto. On the other side, the top echelons of the Nazi government’s
finance offices joined representatives of private banks in proposing the strength-
ening of the regulation of the banking system while preserving private property.
Feldman has stressed the hypothesis of an alliance between Nazi leadership and
private financial groups to fill governmental positions and preserve the system of
private property.125
In the end, the Banking Inquiry Committee recommended strengthening public
supervision and control of private banking and introducing new restrictions on the
creation of credit institutions and the exercise of the banking profession.126 These
recommendations were implemented through the German Bank Act of 1934
(December 1934), which allowed the government to exercise tight control over
private banks, and greatly enhanced the stringency of control regulations.127 To the
regime, the regulation of banking appeared to be a safe and economically sound
alternative to proposals by party radicals for controlling finance through social-
ization.128 Afterwards, and consistent with the theoretical insights of Shleifer and
Vishny,129 the reprivatization of the big commercial banks (Deutsche Bank,
Commerz-Bank, and Dresdner Bank) was implemented within the new regulatory
framework. The alliance of financial interests and the top economic echelons in
the government held the reprivatization of state-owned banks as one of its top
priorities.
The reprivatization of United Steelworks, which put Fritz Thyssen in the leading
position in the company, appears to be an example of the use of privatization to
increase political support. It is worth recalling that Thyssen was one of only two
leading industrialists to support the Nazi Party before it became the most powerful
party on the political scene. Another privatization that can be linked to politics is
the sale of publicly owned shares in Hamburg-SüdAmerika to a Hamburg syndi-
cate in September 1936 when the Hamburg ship-owners had joined the Nazi Party
as a group.
Biais and Perotti analyse the use of privatization to obtain political benefits
within a framework in which governments choose between privatization and fiscal
redistribution as tools to obtain political support.130 Nazi macroeconomic policy
implied an intense increase of taxation, so there was not much opportunity to use
fiscal policy to provide benefits in exchange for political support. In fact, fiscal
revenues from corporate tax grew by 1,365 per cent between 1932/3 and 1937/8,
whereas total fiscal revenues grew by 110 per cent in the same period.131 Undoubt-
edly, a large-scale policy of nationalization of private firms would have deprived the
Nazi government of support from industrialists and business sectors. Instead,
increasing support from these groups was one of the motivations for Nazi
privatization.
(3) Did the Nazi government use privatization to advance its economic policy?
In general terms, the main characteristics of Nazi economic policy were, firstly, the

125
Feldman, ‘Financial institutions’, p. 21.
126
Lurie, Private investment, p. 62.
127
Barkai, Nazi economics, p. 208, provides a detailed account of the regulations implemented, and concludes
that the Reichsbank was the principal victor following the Committee’s conclusions (p. 211).
128
James, ‘Deutsche Bank and the dictatorship’, p. 291.
129
Shleifer and Vishny, ‘Politicians and firms’.
130
Biais and Perotti, ‘Machiavellian privatization’.
131
Reichs-Kredit-Gesellschaft, Germany’s economic situation 1938/39, p. 62.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 51
Table 3. Public expenditure and fiscal revenue, 1932/3–1936/7 (thousand million
(billion) Rm.)
(1) Public (2) Fiscal (2)/(1) (3) National (2)–(1)/(3)
Fiscal year expenditure revenues in % (2)–(1) income in %

1932/3 6.7 6.65 99.2% -0.05 45.2 0.0%

1933/4 9.7 6.85 70.6% -2.85 46.5 6.1%
1934/5 12.2 8.22 67.4% -3.98 52.7 7.6%
1935/6 16.7 9.65 57.8% -7.05 58.6 12.0%
1936/7 18.8 11.49 61.1% -7.31 64.9 11.3%

Notes: Data of public expenditure for 1936/7 are estimated. Data for national income refer to the year in which most of the fiscal
year takes place (that is, the national income of 1932 is for the fiscal year 1932/3).
Sources: (1) Public expenditure: Banker, ‘Germany’, p. 113; (2) fiscal revenues: Reichs-Kredit-Gesellschaft, Germany’s economic
situation 1938/39, p. 98; (3) national income: Reichs-Kredit-Gesellschaft, Germany’s economic situation 1938/39, p. 61.

growth of government fiscal intervention in the German economy through ambi-

tious programmes that involved huge public expenditure, and secondly, a tightly
regulated economy, involving more intense restrictions and controls on markets.
The first shock of public expenditure was a result of public works—particularly the
construction of highways—intended to fight unemployment. Soon after these
projects were set up, expenditure on armaments began to increase. According to
The Banker, increased expenditure after 1933/4 was basically a result of armament
programmes.132 These are the main policies that explain the evolution of public
expenditure in Nazi Germany. As early as April 1934, The Economist reported that
military expenditure was forcing the Minister of Finance to look for new resources;
this need was met by selling public ownership.133
As mentioned above, 1934/5 was the last year for which detailed information on
the budget was officially published. Nonetheless, pieces of financial information
were randomly published in various outlets. By putting together these pieces, The
Banker published data on public expenditures, including its own calculations for
1935/6 and 1936/7 based on official figures.134 Column 1 in table 3 shows these
estimates. Column 2 shows data on fiscal revenues for these fiscal years. Column
3 shows national income in the year in which most of the fiscal year took place.
Table 3 shows that the increase in public expenditure sharply reduced the ability
of fiscal revenues to cover expenditures. The public deficit as a percentage of
national income increased dramatically, putting the German Treasury under
intense pressure. Nathan distinguished between three different periods in prewar
Nazi financial policy: (1) the period of short-term financing, 1933–5; (2) the
period of ‘debt consolidation’, 1935–8; and (3) the period of maximum mobili-
zation, 1938–9.135 There were two possible ways to proceed with debt consolida-
tion. One was turning short-term debt into long-term debt. The second was to
obtain additional resources from, for instance, the sale of state-owned shares in
firms. Indeed, it was during the second period identified by Nathan (1935–8) that
the sale of state-owned shares in most public enterprises took place.

132
The Banker, ‘Germany’, p. 114.
133
The Economist, 31 March 1934, p. 694.
134
The Banker, ‘Germany’, p. 113.
135
Nathan, ‘Nazi war finance’, pp. 41–9 (see above, n. 56).
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
52 GERMÀ BEL

The Banker made explicit connections between increasing financial constraints

and the sale of government shares. For instance, when noting that in the fiscal year
1935/6 demands on the Treasury increased rapidly because of the huge increase in
expenditure on armaments, The Banker wrote that ‘about 500 million marks was
obtained by contributions from the unemployment insurance, by more or less
forced gifts, and by the sale of government shares’.136 Later in the same issue the
report added that, ‘Now that the control over the banks is complete and final the
Government is no longer interested in holding their shares. Rising prices have
enabled the Government to dispose of large amounts of Commerzbank shares and
the Golddiskontbank has sold some of its Deutsche Bank shares’.137
Nazi economic policy implied a sharp rise in public expenditure. The intensity
of this increase was unique among western capitalist countries in the prewar
period. Consistent with this, financial policy was subject to tight restrictions, and
many methods were devised to obtain resources. In fact, Schacht was considered
more a financial technician than an economist.138 Privatization was one of several
methods used. Thus, within a framework of multiple and coexisting objectives,
financial objectives played a role in privatization as well, as several analysts and
scholars had already stressed in the 1930s and 1940s.

IV
Although modern economic literature usually fails to notice it, the Nazi govern-
ment in 1930s Germany implemented a large-scale privatization policy. The gov-
ernment sold public ownership in several state-owned firms in different sectors.
Ideological motivations do not explain Nazi privatization. However, political moti-
vations were important. The Nazi government used privatization as a tool to
improve its relationship with big industrialists and to increase support among this
group for its policies. Privatization was also probably used to foster more wide-
spread political support for the Nazi Party. Finally, financial motivations also
played an important role in Nazi privatization, since receipts from selling the
public firms contributed (together with other fiscal measures) towards financing
huge public expenditure, particularly attributable to the armament programme.
Discussion of the influence of ideological and political motivations on Nazi
privatization also sheds light on an interesting issue in Nazi economic policy;
namely, why the Nazis refrained from implementing a policy of wide-scale
nationalization of private firms, even though the Nazi’s official economic pro-
gramme and their electoral manifestos regularly included this proposal. On the
one hand, the Nazi dilemma between public and private property was not of
primary order, since the regime could rely on control of property owners. On the
other hand, a large-scale policy of nationalization of private firms would have
deprived the Nazi government of support from industrialists and business
sectors. The desire to increase support from those groups was a key motivating
factor in Nazi privatization.

136
The Banker, ‘Germany’, p. 112.
137
Ibid., p. 131.
138
Thyssen, I paid Hitler, p. 138.
© Economic History Society 2009 Economic History Review, 63, 1 (2010)
 NAZI PRIVATIZATION 53
Of course, Nazi privatization does not provide lessons in understanding the
phenomenon of recent privatization, since the economic situation and the political
institutions in 1930s Germany were dramatically different. However, Nazi priva-
tization provides an illustration of how different and compatible objectives can be
pursued through privatization. Interestingly, the Nazi government used privatiza-
tion and regulation as partial substitutes. Privatization was used as a tool to pursue
political objectives and to foster alliances with big industrialists, as well as to obtain
resources to help fund public expenditure. However, even when relinquishing
control over the privatized firms’ ownership, the Nazi government retained control
over the markets by means of establishing more restrictive regulations and
government-dependent institutions. All in all, Nazi privatization did not imply a
reduction of government control over the market.
Nazi economic policy in the mid-1930s was unique in several ways, and priva-
tization was just one of these instances. Nazi Germany privatized systematically,
and was the only country to do so at the time. This drove Nazi policy against the
mainstream, which flowed against the privatization of state ownership or public
services until the last quarter of the twentieth century.

Universitat de Barcelona

Date submitted 29 March 2006

Revised version submitted 15 May 2008, 17 July 2008, 18 September 2008
Accepted 20 October 2008

DOI: 10.1111/j.1468-0289.2009.00473.x

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